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Title:Real effective exchange rate uncertainty, threshold effects, and aggregate investment: Evidence from Latin American countries PDF Logo
Authors:Clausen, Bianca
Issue Date:2008
Series/Report no.:IWP Discussion Paper 2008/2
Abstract:This paper provides new empirical evidence on the relationship between real effective exchange rate uncertainty and aggregate investment in six Latin American economies. Its main contributions are that it explicitly tests for linear as well as non-linear effects of uncertainty in a time-series model that allows the country-specific interpretation. A (G)ARCH-based uncertainty measure is constructed for each country which is then included in a GMM time-series model that accounts for the endogeneity of the variables. When accounting for threshold effects, this paper finds that high levels of real effective exchange rate uncertainty affect aggregate investment negatively in all countries in the sample.
Subjects:exchange rate uncertainty
GARCH
investment
threshold effects
GMM
JEL:F21
F31
Document Type:Working Paper
Appears in Collections:iwp Discussion Papers, Institut für Wirtschaftspolitik, Universität Köln

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